The Auto Warranty Commitment Program (AWCP) in the U.S.

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Media Type

Document

Media Date

August 2019

Additional Information

On March 30, 2009, President Obama announced a plan for government-funded protection of warranties on new vehicles sold by General Motors (GM) and Chrysler while they underwent restructuring. The initiative, which would become known as the Auto Warranty Commitment Program (AWCP), was intended to bolster consumer confidence by alleviating a major risk (the loss of warranty benefits) to consumers associated with the companies’ potential bankruptcies. Under the AWCP, GM and Chrysler established independent special purpose vehicles to which they transferred a combination of their own money and funding they received from Treasury in the form of a loan. The SPV then acted as an insurance fund, guaranteeing the availability of cash to respond to eligible warranty claims should either company fail or otherwise become unable to meet new claims on its own. The program closed on July 21, 2009, without either company’s SPV having been called into action. At the time of its announcement, the program received generally positive reviews from some in the industry and media, although there were concerns that the program would be more difficult to implement than the Administration had described.

Crisis

Global Financial Crisis (2007-2009)

Intervention

Non-bank Restructuring Not Applicable

Content Type

Working Paper

Publisher(s)

Yale University: School of Management: Yale Program on Financial Stability (YPFS)

Author(s)/Creator(s)

Ben Henken

Language(s)

English

Case Series

2020 YPFS Preliminary Discussion Drafts

Related YPFS Publications

2008-2009 Automotive Bridge Loans for Chrysler and GM

Country(ies) or Region(s)

Canada United States